May 12, 2006

 

US Wheat Review on Thursday: Ends near session tops before USDA data

 

 

U.S. wheat futures ended firm Thursday after setting session highs late on rallying gold and crude oil markets, strong weekly U.S. wheat export sales and speculative buying before Friday's key U.S. Department of Agriculture 2006 wheat production and ending stocks reports, brokers said.

 

Most active June gold at the New York Mercantile Exchange hit levels not seen since the early 1980s on fund buying and a weak dollar before settling at US$721.50 an ounce, up US$15.80 on the day.

 

Moreover, the USDA is expected to forecast Friday a year-over-year drop in 2006-07 U.S. hard red winter wheat (higher protein bread-making wheat) production Friday because of this year's adverse growing conditions and a year-over-year decline in 2006 global wheat production.

 

CBOT July wheat ended Thursday up 7 1/2 cents at US$3.92 after setting a new 2 1/2-month top of US$3.92 1/2.

 

CBOT May wheat ended up 5 cents at US$3.82 1/2 per bushel after 34 deliveries were posted Thursday against CBOT May wheat futures.

 

The last date available was May 3, while open interest in CBOT May wheat dwindled to 481 lots ahead of Thursday's open outcry. The last day for deliveries against May wheat is May 23. Wheat registrations late Wednesday at the CBOT totaled 1,675 lots, unchanged from the previous day.

 

Speculative funds bought about 4,500 contracts during Thursday's open outcry session.

 

Iowa Grain bought about 1,200 CBOT July late after buying about 2,000 July earlier, while Calyon Financial bought about 1,200 July, brokers said.

 

Options trade was again active, while brokers said implied volatility for July had fallen about 1% this week since ending higher Tuesday.

 

JP Morgan and Rand Financial sold out-of-the-money CBOT December US$4.90 wheat calls Thursday. Rosenthal Collins was a dominant CBOT wheat option trader Tuesday and Wednesday, trading July and September wheat put spreads and buying in- and out-of-the money December calls on Wednesday.

 

Midday spot U.S. HRW Gulf barge bids rallied 3 cents Thursday while spot U.S. SRW bids were unchanged, cash sources said.

 

The USDA reported early Thursday that weekly U.S. wheat export sales (old- and new-crop combined) totaled 413,800 tonnes, led by sales of new-crop hard red winter wheat to Mexico.

 

In overnight wheat export business, Japan bought 90,000 tonnes of wheat, including 50,000 tonnes of U.S. wheat.

 

Traders also awaited any news from Iraq and India as to tender details.

 

In global wheat news, the European Union grain management committee Thursday granted 153,000 metric tonnes of subsidized wheat from the free market in its weekly tender with a maximum refund of EUR6.20/tonne.

 

In last week's tender the committee granted 44,000 tonnes of wheat at EUR6.20/tonne.

 

Looking to Friday's key USDA report, analysts on average expected the USDA to report 2006 U.S. all-wheat production at 1.9575 billion bushels, down from the 2005 U.S. wheat production of 2.105 billion.

 

U.S. winter wheat production was seen at 1.3730 billion bushels, down from last year's 1.499 billion; hard red winter wheat production was seen at 745 million bushels, down from last year's 930 million; soft red winter wheat production was seen at 359 million, above last year's 309 million; and white wheat production was seen at 258 million bushels, down from last year's 260 million bushels.

 

Top U.S. winter wheat producer Kansas' abandonment figure is key amid declining winter wheat crop ratings late in the season, freeze and drought damage.

 

Analysts also expect the USDA to report 2005-06 U.S. wheat ending stocks totaled 535 million bushels, down from the previous year's 540 million. U.S. wheat ending stocks for 2006-07 were seen at 454 million bushels.

 

Traders also awaited the USDA's initial 2006 global wheat production estimates.

 

The International Grains Council on April 27 forecast 2006-07 world wheat production at 598 million metric tonnes, down from the 2005-06 output of 619 million tonnes.

 

"Bottom line, the wheat production trends both in the U.S. and in foreign countries are pointed moderately lower," said Bill Nelson, a grain analyst at Ag Edwards & Son. "But much of the world's wheat production is determined by weather that occurs over the next several months. That means that the crop is far from set and prices will be sensitive to daily weather developments throughout the world."

 

 

Kansas City Board of Trade

 

KCBT July ended up 6 1/4 cents at US$4.71 1/2 after hitting a high of US$4.72 1/2. Tuesday's contract high in KCBT July wheat of US$4.74 1/2 held, while the 9-day Relative Strength Index for KCBT July settled at 69, just below the overbought level of 70.

 

KCBT May closed up 11 cents at US$4.66, a match of the contract high. There were 25 redeliveries of KCBT wheat on Thursday.

 

 

Minneapolis Grain Exchange

 

MGE July settled up 6 3/4 cents at US$4.50 1/4 per bushel and MGE May wheat ended flat at US$4.48 per bushel.

 

There were no deliveries against MGE May wheat on Thursday.

 

Cash spring wheat basis bids were firm Thursday amid slow farmer sales, cash sources said.

 

Thursday's Minneapolis wheat receipts totaled 117 railcars versus last year's 144 railcars. There were 25 durum receipts versus last year's 36 cars.